BRIC-bats in Copenhagen

The fast growing economies of the world which have come to be known as BRIC: Brazil, Russia, India and China, make little secret of their focus on continued economic growth as a higher priority than cleaning up the environment. This does not mean they are opposed to renewable energy sources or clean technologies; they will be some of the biggest investors and largest users of these new technologies. But that is not enough to support their economic growth so China, for example, will continue to build about 100 GW of coal-fired electric capacity a year—or one third of the total coal burning capacity of the U.S. even as it becomes perhaps the world’s largest producers of wind turbines and solar panels.

Why? Because China has coal and fears dependence on Russian gas—and the US and EU will buy as many wind turbines and solar panels as can be produced—and what they don’t buy can be used at home. This presents an inconvenient truth to the Copenhagen conference. It means that if BRIC countries stand firm and remain outside the embrace of a new treaty NOTHING the developed countries do to reduce emissions on their own will be sufficient to overcome the growing emissions from these BRIC economies.

Does that mean the developed countries should do NOTHING—of course not. But it also means that the developed countries should not as like that proverbial circular firing squad bankrupting their own economies to level the playing field with the BRIC countries.

Will the BRIC Countries just Say No?

I doubt that seriously because what these BRIC countries want most is access to Western technology not just to reduce their own environment problems which are killing their own people and, as a happy byproduct, reduce emissions, but to accelerate their rates of growth and improve their competitive advantage. The real hidden agenda at Copenhagen by BRIC and other emerging economies is their willingness to ‘trade to play’—that is how much advanced technology investment will the developed world make in BRIC and elsewhere to induce them to play along with a Copenhagen treaty? And, just as importantly, how much bleeding of intellectual property will the developed world tolerate to get BRIC participation at Copenhagen?

We are already seeing this set up in these ‘consultative conferences’ going on around the world in this countdown to Copenhagen. The UN enablers are repeating the mantra that intellectual property issues are critical to the outcome of climate negotiations. [1] Some of this is logical, developing countries lack access to the newest technologies or materials and thus want the US and EU to supply that technology so they can leapfrog a generation or two of R&D and go immediately to the cleanest technologies for energy production and emissions reduction. For the US and EU this is seductive because it has the potential of drawing the BRIC countries into the Copenhagen framework and opening markets for sales of these advanced Western technologies. Win-win, right?

Déjà vu in Sakhalin

Energy companies got a fresh wake up call on the risk of their intellectual property when Russia began making noise recently about its desire to push ExxonMobil out of the Sakhalin gas project because Russia now fears that XOM will compete with Gasprom in exports to China. The Russians had already run Royal Dutch Shell out of the neighborhood. The contracting footprint of the super major oil & gas companies is littered with examples of projects where they were enticed to bring their technology and help develop a new energy source only to be pushed out once that technology had been deployed. The better the US technology for energy E&P the more leverage these super majors will have with the National Oil Companies and Sovereign Wealth Funds who have succeeded to their former market positions.

Similarly, Microsoft and other technology players have long suffered from piracy for their software products. A recent report is that Microsoft has had some success stemming the theft by selling very low priced versions of original products in China. IP issues abound in global markets and whether we have a Copenhagen climate change treaty or not they will continue to bedevil business interests.

Business to Congress: Wake Up, People!

There was one good sign that US companies are waking up to this risk when the US House of Representatives adopted an amendment to HR 2410 establishing a clear US policy that any treaty on climate change submitted to the US Senate for approval must adequately protect US intellectual property rights. The reason I say this is a good sign is that the amendment was adopted 432-0 by the House on June 10 209. When have you ever seen such unanimity in Congress unless all the forces of K Street are lined up on the bill especially with Rep Ed Markey (D-MA), chair of the House Global Warming subcommittee and ranking member, James Sensenbrenner (R-OH) both signed on to the amendment.

It seems clear from this action that US business is working Congress hard to narrow the options for the Obama Administration going into Copenhagen. Sensenbrenner and Markey also tagged along with House Speaker Nancy Pelosi on her trip to China and I assume that was an issue of interest to the Chinese as these politicians tried to define the price they’ll have to pay to get the Chinese on board at Copenhagen.

So what?

This technology risk is not an energy issue alone, but a potentially broad grab at intellectual property across a wide swath of the global economy and business interests are smart to call in their chits to protect their IP. Patent holders in pharmaceuticals, software, and other sectors worry that a faulty Copenhagen treaty will expose them to poaching, piracy, misappropriation of their IP and reduce their global market share growth potential. It is a very legitimate fear.

There is enormous business opportunity in a recovering economy from opening markets in BRIC countries to new technology including clean energy technology. A rising tide of investment around the world can do a lot of good while it helps the IP holders of rights tot hat technology do well from growing their business and earning a return on their invested capital.